While naysayers are skeptical over the performance of Modi 3.0 government as it's a coalition one, Morgan Stanley's Ridham Desai's bullishness over India remains unhinged even after the BJP's underwhelming victory in the Lok Sabha elections 2024.
Desai, in an interaction with CNBC-TV18, stated that he doesn't see any change in Prime Minster Narendra Modi's will to undertake structural reform even in his third tenure.
He further pointed macro stability and policy continuity as the key focus areas under Modi 3.0. On top of that, Desai also expects the fiscal consolidation under Modi 3.0 to accelerate when compared to the previous tenure, which was marred by the impact of the COVID pandemic.
Betting on India's strong growth story, Desai also expects a return of foreign institutional investors over the next six months. "Currently, there is a lack of space for FIIs to buy in the Indian market as domestic investors are pumping in money everyday," he explained.
However, Desai expects a shift in the coming months as he anticipates corporate issuance to see an upcycle, offering a space for FIIs to invest. On that account, he estimates a return of FIIs into the Indian market in the next six months.
Within the Indian market, Desai chalked out pockets like domestic cyclicals, including private banks, consumption and industrials that attract his bullishness.
"Private banks look good. Consumption stocks across the spectrum look good. Especially areas where there is any room for valuation to rise would be a much better area to be invested in," Desai said.
Among industrials however, Desai cautioned investors to be a bit selective as valuations in this pocket within the market may also be elevated in some places.
Meanwhile, as a contra-bet, Desai feels the information technology sector provides a good alternative.
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